Greek leaders fail to agree on austerity measures

DEREK GATOPOULOS - Associated Press,NICHOLAS PAPHITIS - Associated Press

ATHENS, Greece (AP) — The European Union's top finance official urged political leaders in debt-ridden Greece to quickly agree on further austerity measures, but a new government bid to reach a consensus on that issue failed Friday.

EU Monetary Affairs Commissioner Olli Rehn said cross-party talks in Athens must continue, despite the main opposition conservatives' refusal to endorse more cutbacks.

"The (EU) Commission regrets the failure of Greek party leaders to reach consensus on economic adjustment to overcome the current debt crisis." Rehn said.

"An agreement has to be found soon. Time is running out," he said, regarding support needed for the EU-IMF program.

The commissioner's warning came after Greek conservative leader Antonis Samaras refused to bend to EU pressure after a three-hour crisis meeting involving the heads of all Greece's major political parties.

"The only thing worth discussing right now is how to renegotiate the terms of the (bailout loan) agreement," Samaras said, adding that austerity measures would "flatten the Greek economy and destroy Greek society."

The government has a majority in parliament, but EU officials have demanded agreement between the two largest parties to ensure that a bailout program can run smoothly beyond the next general election, due in 2013. Brussels is increasingly frustrated with the slow pace of structural reforms.

Prime Minister George Papandreou insisted he would serve his full term and continue to court opposition support amid growing investor fears that the barely-solvent country will not be able to fully repay its debts — expected to reach euro360 billion ($513 billion) this year.

"Right now, Greece needs to display the greatest possible unity, decisiveness and seriousness," Papandreou said in a live TV address. "The government was called on, and has the responsibility to get Greece out of this crisis. ... We will honor this commitment to the fullest extent, with or without broader political consensus."

Papandreou's Socialists face increasing public hostility to pension and salary cuts imposed last year, together with increases in taxes and retirement ages. Proposed new measures include further pension cuts, new tax increases and a special consumption tax on soft drinks — as well as an ambitious euro50 billion ($71 billion) privatization plan.

Thousands of young Greeks held peaceful anti-austerity protests in major Greek cities for a third day Friday, chanting slogans such as "Take your measures and clear off."

Earlier, President Karolos Papoulias chaired a rare meeting of all the main party leaders after Papandreou failed this week to sway the opposition over the new measures, which will reach until 2015, two years beyond the present government's mandate.

Government spokesman Giorgos Petalotis said Papandreou offered opposition leaders a say in key administrative appointments to deal with the crisis.

Debt inspectors from the EU, the International Monetary Fund and the European Central Bank, known as the troika, are in Athens to monitor progress on last year's euro110 billion ($155.8 billion) bailout loan deal for Greece, which remains shut out of the bond markets and is facing a potential financing gap in 2012.

They will determine whether Athens has met criteria for a June loan installment, worth euro12 billion and vital to avoid a summer default.

European Central Bank President Jean-Claude Trichet reiterated that Greece could avoid restructuring its debt and called speculation of a Greek exit from the euro "completely unrealistic."

"Greece has to implement this program completely and rigorously. ... It is very important to correct the mistakes of the past and pave the road for a sustainable job creation," Trichet was quoted as saying by Germany's daily Aachener Zeitung in issues to be published Saturday.

"For years Greece has lived beyond its means, raised public wages and salaries time and again. It is absolutely necessary to reform the country so that it can get back on its own feet. It is in the Greeks' very interest that the future will bring growth and jobs," Trichet said.

Greece's crisis took an ominous turn Thursday, when Eurogroup chairman Jean-Claude Juncker reportedly said the IMF may have to hold back the next tranche, citing a strict interpretation of Fund rules.

Asked about Juncker's comments, German government spokesman Christoph Steegmans said only: "We are still waiting for the report from the troika mission that is supposed to come between the beginning and middle of June."

Amid the uncertainty, the main stock index in Athens closed down 1.7 percent Friday.


Elena Becatoros in Athens, and Juergen Baetz and Geir Moulson in Berlin contributed to this report.